Elliptic says its tool, built by four Ph.D. holders, can make a
hugely accurate guess as to who each wallet belongs to — and it
can do so in real time. Using machine-learning, its software
crunches through the internet and the dark Web, skimming
references to wallets and other digital clues to build up a
picture of the owner.
Elliptic has released a
visualisation tool showing the flow of bitcoin between
entities over the entire six-year history of bitcoin, naming the
250 largest entities where bitcoins are sent to and from.
That means
banks have been wary about holding bitcoin — if they take a
bitcoin that's just been
earned selling drugs in a dark Web market like Silk Road 2.0,
or that has passed through a known money-laundering service, they
could end up in huge trouble with regulators.
Elliptic, a bitcoin analytics and storage startup based in
London, thinks it's just made a huge breakthrough that could make
banks way more interested in bitcoin.
He added: "We have developed this technology not to incriminate
nor to pry; but to support businesses’ anti-money laundering
obligations. Compliance officers can finally have peace of mind,
knowing that they have performed real, defensible diligence to
ascertain that their bitcoin holdings are not derived from the
proceeds of crime.”
The company has created a
sophisticated bit of software that it says can identify where a
bitcoin has come from. That's a big deal for banks, which
have a legal obligation to find out where the money they hold is
coming from to ensure they're not holding proceeds of crime.
Bitcoin isn't untraceable — every transaction is recorded on a
public ledger called the blockchain. But the digital wallets that
carry out transactions are anonymous, making it extremely
difficult to actually make sense of the data. You could do some
digging around and make a guess, but it's hard and
time-consuming.
A
visualisation of the flow of money to and from Silk Road
2.0.
Elliptic
Tom Robinson, Elliptic's cofounder, told Business Insider the
tool could be a "game changer for the institutionalisation of
bitcoin." If banks can satisfy anti-money-laundering regulation
then they can start to think about handling bitcoin. The tool was created after conversations
with dozens of lenders.
In an emailed statement on Thursday, Elliptic's CEO James Smith
said “if digital currency is to take its legitimate place in the
enterprise it inevitably must step out of the shadows of the dark
web. Our technology allows us to trace historic and real-time
flow, and represents the tipping point for enterprise adoption of
bitcoin.
Later this year, the company will launch a API of its software,
meaning banks will be able to effectively bolt it on to their
existing systems and use it. Kevin Beardsley, an analyst at
Elliptic, said around five banks have already signed up for the
API. (He didn't say which ones.)
Dr James Smith, CEO of
Elliptic.
Elliptic